Specialisation and Division of Labour

Division of Labour is where a production procedure is split into different stages. Workers are responsible for a particular stage, usually in which their expertise lies. Thus by doing this, the maximum production for a day’s work would increase.

An equal division of labour is where a task is split into separate jobs so that it would take roughly the same amount of time to complete one job as another.

Adam Smith provided an example of this; in a day 1 worker could create a maximum of 20 pins, so 10 workers could create 200 a day. However if the production process was split into 10 different stages, with one worker on each stage the maximum production would dramatically increase to 48,000 pins produced a day.
This occurs because the individual worker would become skilled at performing specialised tasks – particularly in his production stage. This increases their efficiency at carrying out a certain task. Specialisation is also efficient as workers do not spend time moving from one activity to another so firms could operate on a larger scale of production. Also some people aren’t as good at doing certain things as others, and so this would slow them down. Whereas if they did something that they were very good at and another worker did something they were good at – but the first worker wasn’t as good at doing – then the production would be increased.

A domestic example of division of labour is washing the dishes. It is much quicker if one person washes the dishes and one person dries them and another puts them away than it is if there are 3 sinks and each person had to do all 3 tasks.

David Ricardo – another famous economist – also introduced the principle of comparative advantage. Say there are 2 people; John and Kieren who both produce glasses and watches. John can produce 6 glasses and 12 watches, whereas Kieren can produce 2 glasses and 10 watches. Obviously John has the absolute advantage because he can produce 18 products a day whereas Kieren can only produce 12. Also John is better than Kieren at producing both glasses and watches.

However instead of John making both glasses and watches, he should specialize in making glasses. This is because for every 1 glasses he produces he give up making 2 watches. Whereas for every 1 glasses Kieren produces he gives up making 5 watches. This means that John is the lower-cost producer of glasses and Kieren is the lower cost producer of watches, and so both should specialize in that product. This is because rather than consider how many products can be produced in a certain amount of time, it should also be taken into account how much you give up by producing one thing. If Kieren and John specialize in one product, they can then trade with each other, and would both be better off. On a larger scale where countries trade with each other, the living standards of both countries would be increased due to specialisation.

A commercial example of this could be if a lawyer is paid £100 an hour. He can type 80 words an minute. He hires a secretary for £12 an hour but she can only type 60 words a minute. If he decides to fire her and type the letters himself – because he is slightly quicker – he will be worse off even though he has the absolute advantage. Whereas he has the comparative advantage at being a lawyer and the secretary has the comparative advantage at typing. If the lawyer decided he would be also do the secretary work, and he writes a report taking him 15 minutes, whereas it would only take the secretary 20 minutes to write it, he (the lawyer) looses out because it would only cost him £4 to hire the secretary to write the report whereas he could be earning £25 in the time it would take him to write the report. Therefore if he specialises at law and hires the secretary to specialise in her comparative advantage then both are better off. The secretary is earning for £12 a hour – better than being unemployed – and the lawyer is earning £100 an hour – better than trying to be a lawyer and a secretary!